Interest rate cuts, China’s stimulus package and hopes of a soft landing have all contributed to the largest jump in investor optimism since June 2020, according to the Bank of America’s global fund manager survey for October.
The survey also recorded the biggest jump in growth expectations since May 2020.
Backing up the improved sentiment for global growth, managers increased equity allocations by their largest amount in over four years, while there was a record monthly drop in bond allocations.
See also: Will the European Central Bank cut interest rates faster than expected?
The BofA Global Research report also witnessed a rotation into EM stocks, driven by China’s stimulus package, as well as discretionary and industrials. Consumer staples and utilities were on the other end of the trade.
Meanwhile, investors say the ‘biggest winners’ from China’s stimulus package are likely to be EM stocks and commodities, while it will negatively impact government bonds and Japan stocks.
Overall, 76% of respondents expect a soft landing for the US economy, 14% believe there will be a ‘no landing’ scenario, while 8% fear a hard landing.
Meanwhile, investors are forecasting 160bps of interest rate cuts over the next 12 months, while 85% expect the yield curve to steepen.
